Corrective Action Plans

Financial department in conjunction with public housing will migrate aged tenant recds currently kept in Excel Format to the Lindsey HA Software System. This will ensure accurate records are kept and the solve the reported deficiency.

Late HUD Financial Reporting for the Housing Choice Voucher Program Management position. Management concurs that the audited fiscal year 2025 financial information was not submitted within the HUD deadline. Management response. The revised finding cites 24 CFR 5.801. The applicable PHA unaudited financial information is due 60 days after fiscal year-end and audited financial information is due nine months after fiscal year-end, subject to applicable HUD instructions or authorized extensions, in the electronic format specified by HUD. Management accepts the late-reporting condition. The response addresses its repeated nature and separates the Housing Choice Voucher reporting calendar from the broader FAC submission. Continuity with Finding 2024-003. The FY 2024 CAP committed to improved external and internal control procedures for FY 2025 reporting, with a March 31, 2026 completion target. The FY 2025 HUD finding confirms that the required audited submission was not completed timely. Management continues that commitment with a separate HUD calendar, documented staff handover, backup access, training, reconciliations, and weekly review. The October 31, 2026 date is a recovery target for the overdue submission, not evidence of compliance with the prior target or an authorized extension. Finance will retain the original target and document partial implementation and the personnel and accounting-process issues reported in the finding. The revised finding reports no questioned costs. Management will retain HUD submission receipts and any written extension approval as evidence of reporting status; the absence of questioned costs does not resolve the timeliness deficiency. Corrective Action 1. Designate a Housing Choice Voucher financial-reporting coordinator and backup, with the Director of Finance retaining accountability for the submission and reconciliation to municipal records. 2. Prepare a FASS-PH or successor-system calendar covering the unaudited and audited submissions, HUD review periods, resubmissions, and retained acceptance evidence. Track due dates independently from the FAC calendar. 3. Reconcile Housing Choice Voucher trial balances, bank accounts, HAP activity, administrative fees, portability, accounts payable, receivables, deferred inflows, interfund activity, SEFA expenditures, and Financial Data Schedule line items before submission. 4. Determine and document the status of the fiscal year 2026 unaudited submission. If it was not accepted by HUD, complete the submission or obtain written HUD instructions immediately and retain the resulting correspondence. 5. Submit the fiscal year 2025 audited information promptly after final audit issuance and retain the electronic confirmation, rejection or validation reports, corrections, and final acceptance. 6. Perform an independent supervisory comparison of the final HUD submission to the audited program schedules and resolve all differences. 7. By September 30, 2026, document the reporting coordinator’s handover, backup access, submission instructions, and training. Finance will review readiness weekly until the overdue audited submission is completed. Staff turnover or a change in service provider will not suspend reporting responsibility. Implementation Milestones Required Action Owner Completion Evidence Target Date Appoint reporting coordinator and approve HUD calendar. Federal Programs Director Designation memorandum and reporting calendar Sep. 30, 2026 Document FY 2026 unaudited submission status and cure any exception. Federal Programs Director HUD confirmation or correspondence Oct. 15, 2026 Submit FY 2025 audited information after audit issuance. Federal Programs Director HUD validation and acceptance evidence Oct. 31, 2026 or earlier Reconcile and submit FY 2026 audited information timely. Federal Programs Director Signed reconciliation and HUD acceptance Mar. 31, 2027 Responsible official. Amarilys Vázquez, Director of Federal Programs, in coordination with the Department of Finance Anticipated completion. October 31, 2026 is an internal recovery target for the overdue fiscal year 2025 audited submission, with submission promptly upon issuance if sooner. It does not extend the HUD deadline. Fiscal year 2026 audited information is due March 31, 2027. Any overdue unaudited information requires immediate action; the October status-review date is not an extension. Evidence of completion. HUD acceptance evidence is retained for the fiscal year 2025 audited submission; fiscal year 2026 unaudited status is documented and any exception is resolved; the audited Financial Data Schedule agrees to the audited program records; and the next audited submission is accepted by HUD within nine months after fiscal year-end.

FINDING 2025-002 "Housing Choice Voucher Tenant Files - Eligibility - Internal Control over Tenant Files - Noncompliance & Material Weakness " SHA RESPONSE The Springfield Housing Authority acknowledges the six (6) errors as delineated in the full 2025 FYE audit report accounting for eight (8) percent of files reviewed that were impacted by errors related to adjusted annual income. In 2025, the Springfield Housing Authority Housing Choice Voucher program identified the following positions to undertake income and rent calculations: one (1) Special Programs Coordinator, four (4) HCV Specialists and one (1) Program Integrity Specialist. The primary function of the Program Integrity Specialist position is to audit and quality control tenant files including adjusted annual income calculations conducted by HCV Specialist. The errors were primarily attributable to staffing shortages, former staff, lack of qualified candidates in the local workforce, unprecedented staff turnover resulting in the subsequent continuity and disruption in caseload management. The SHA has taken and will continue to take corrective actions to address the underlying causes and eradicate the errors associated with calculating adjusted annual income. In addition to the plan of action listed below, corrective actions include but are not limited to: pursuing alternative recruitment options; Training/cross training staff responsible for adjusted income calculations, ensuring staff responsible receive refresher training on applicable policies, procedures and calculation requirements as well as additional external training; management quality control reviews will provide additional scrutiny for higher-risk and more complex files. The SHA recognizes that staffing challenges may not be eliminated, accordingly, the corrective actions above are intended to address both the immediate errors identified in the audit and the underlying process weaknesses that contributed to the errors. The SHA will closely monitor implementation of these measures to ensure that adjusted incomes are accurate, properly documented and completed in accordance with applicable requirements. The Springfield Housing Authority hired third party consultants to assist with processing annual recertifications 1st Quarter of 2026 that continued through July 2026. The purpose of the third-party contractor was to complete a backlog of annual recertifications that were outstanding and due in FY2025. The Springfield Housing Authority collected all of the recertification documentation and submitted it to the third-party vendor for processing. Once the processing was completed by the third-party vendor, the Director of the Housing Choice Voucher program audited the files for accuracy (calculations and required documentation). Based on the success of this process in 2026, the Springfield Housing Authority issued a Request for Proposal and awarded a contract to a third-party contractor to assist in completion of 2026 recertifications as a consistent measure while the HCV department trains and onboards new HCV staff. The error rate was directly attributable to staff no longer working for the Springfield Housing Authority. The Director of HCV, HCV Manager, HCV Specialists, HCV Special Programs Coordinator and Program Integrity Specialist are continually provided with additional internal and external training opportunities in HCV rent calculations, program integrity and HOTMA provisions in 2025 and 2026. In addition to the aforementioned, the SHA will take the following corrective actions to correct the errors and/or prevent the errors moving forward: • The Program Integrity Specialist and/or Director of Housing Choice Voucher programs will conduct reviews of 100% of annual and interim recertifications for HCV program participants by December 31, 2026. A formal quality control review log has been established with on-going implementation. • The Program Integrity Specialist will ensure 100% audited file corrections are completed by the HCV Specialists, monthly. • The HCV Director and/or Manager will review 10% of the recertifications audited by the Program Integrity Specialist as an additional quality control measure by December 31, 2026. A formal quality control review log has been established with on-going implementation. • Any newly hired HCV Director, HCV Manager, HCV Specialists and Program Integrity Specialist will be provided with additional external training in Housing Choice Voucher program income and rent calculations and program integrity within sixty (60) days of employment. • The HCV Director and/or Manager will re-review the files identified with errors during the independent audit and resolve the errors in accordance with the SHA Administrative Plan and HUD rules and regulations by December 31, 2026. A formal quality control review log has been established with on-going implementation. • Further, upon identifying the FY2025 annual inspections were not fully completed by SHA Inspection staff, the Springfield Housing Authority issued a Request for Proposal for a third-party vendor to complete 100% annual inspections and assist with NSPIRE standards training and evaluation of $HA properties. The Springfield Housing Authority anticipates contract award September 2026 to address the outstanding unit inspections portion of the audit finding. Person Responsible: Kylie Jackson, Housing Choice Voucher Program Director Anticipated Completion Date: December 31, 2026

FINDING 2025-001 "Public Housing Tenant Files - Eligibility- Internal Control Over Tenant Files Non-Compliance and Material Weakness" SHA RESPONSE The Springfield Housing Authority acknowledges the eleven (11) errors as delineated in the full 2025 FYE audit report accounting for twenty (20) percent of files reviewed that were impacted by errors related to adjusted annual income. In 2025, the Springfield Housing Authority Public Housing program identified the following positions to undertake income and rent calculations: three (3) Occupancy Specialists, three (3) Asset Managers and one (1) Program Integrity Specialist. The primary function of the Program Integrity Specialist position is to audit and quality control tenant files and rent calculations conducted by Occupancy Specialists. The Asset Managers are responsible for reviewing 3% of recertifications audited by the Program Integrity Specialist position as an additional quality control measure. The errors were primarily attributable to staffing shortages, former staff, lack of qualified candidates in the local workforce, unprecedented staff turnover resulting in the subsequent continuity and disruption in caseload management. The SHA has taken and will continue to take corrective actions to address the underlying causes and strengthen the rent calculation process. In addition to the plan of action listed below, corrective actions include but are not limited to: pursuing alternative recruitment options; training/cross training staff responsible for rent calculations, ensuring staff responsible for rent calculations receive refresher training on applicable policies, procedures and calculation requirements as well as additional external rent calculation training; management quality control reviews will provide additional scrutiny for higher-risk and more complex files. The SHA recognizes that staffing challenges may not be eliminated, accordingly, these corrective actions are intended to address both the immediate errors identified in the audit and the underlying process weaknesses that contributed to the errors. The SHA will closely monitor implementation of these measures to ensure that rent calculations are accurate, properly documented and completed in accordance with applicable requirements. The Asset Managers, Occupancy Specialists and Program Integrity Specialists were provided additional internal and external training opportunities in low rent public housing rent calculations and program integrity in 2025 and 2026. In addition to the aforementioned, the SHA will take the following corrective actions to correct the errors and/or prevent the errors moving forward: • The Program Integrity Specialist will conduct reviews of 100% of annual and interim recertifications for public housing tenants by December 31, 2026. A formal quality control review log has been established with on-going implementation. • The Program Integrity Specialist will ensure---1 0% a1:.1ditea file corrections are completed by the Occupancy Specialists, monthly. • The Asset Manager(s} will review 10% of the recertifications audited by the Program Integrity Specialist as an additional quality control measure by December 31, 2026. • Any newly hired Asset Managers, Occupancy Specialists and Program Integrity Specialists will receive additional external training in low rent public housing rent calculations and program integrity within sixty (60} days of employment. • The Asset Managers will re-review the files identified with errors during the independent audit and resolve the errors in accordance with the SHA Admissions and Continued Occupancy Plan and HUD rules and regulations by December 31, 2026. • Upon identifying the occurrence of late reexams in Public Housing operations, the Springfield Housing Authority hired third party consultants to assist with processing annual recertifications 1st Quarter of 2026 that continued through July 2026. Based on the success of this process within the HCV division in 2026, the Springfield Housing Authority issued a Request for Proposal and awarded a contract to a third-party contractor to assist in completion of 2026 recertifications as a consistent measure while the Public Housing and HCV departments hire, train and onboard new staff. • Further, upon identifying the FY2025 annual inspections were not fully completed by SHA Inspection staff, the Springfield Housing Authority issued a Request for Proposal for a third-party vendor to complete 100% annual inspections and assist with NSPIRE standards training and evaluation of SHA properties. The Springfield Housing Authority anticipates contract award September 2026 to address the outstanding unit inspections portion of the audit finding. Person Responsible: Monica Johnson, Asset Manager Anticipated Completion Date: December 31, 2026

Inadequate HDS System Access Controls - HVC - Commerce - The Montana Department of Commerce has developed a user access review procedure to be performed semiannually. The first review was completed in June 2026. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 12/16/2026

Noncompliant Section 8 Cash Management - HVC - Commerce - The Montana Department of Commerce took steps in September 2023 to update the Treasury State Agreement to clarify that settlement dates occur within five business days after receiving funds from the United States Department of Housing and Urban Development. In September 2024, the department again coordinated a revision to the agreement language to reflect mid-month payment practices. These updates are included in the 2026 Treasury State Agreement, signed July 1, 2025. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 7/1/2025

Inadequate HAP Reconciliation Controls - HVC - Commerce - The Montana Department of Commerce has provided additional staff training to ensure housing assistance payments are issued timely, even though the error rate was less than one percent. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 8/19/2026

Inadequate Inspection Controls - HVC - Commerce - The Montana Department of Commerce implemented the United States Department of Housing and Urban Development’s new inspection protocol on July 1, 2026. This protocol will ensure staff are able to perform the required inspections. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 9/18/2025

Inadequate HAPPY System Access Controls - HVC - Commerce - The Montana Department of Commerce began conducting user access reviews during the audit period. The department’s Chief Information Officer updated the Access Control Policy and distributed it to all employees. Staff received training on access control requirements on May 28, 2026. The department plans to obtain a new vendor to replace the HAPPY system by October 2028. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 10/31/2028

Inadequate Field Agent Payment Controls - HVC - Commerce - The Montana Department of Commerce has updated its processes to ensure that contract limits are reviewed prior to payments being issued and that contract amendments are pursued when needed. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 8/24/2026

Inadequate HQS Inspection Controls - HVC - Commerce - The Montana Department of Commerce has updated its inspection procedures to clearly outline requirements, including annual reexaminations. While the department may have lacked documentation of certain monthly reports, both the fiscal year 2024 and fiscal year 2025 Section 8 Management Assessment Program Indicator 12 inspection reviews received all available points. The department is also transitioning to the National Standards for the Physical Inspection of Real Estate (NSPIRE) model for inspections. Staff completed training on June 16, 2026, and have begun using the federal inspection checklist to ensure compliance with current standards. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 9/18/2025

Inadequate FASS Reporting Controls - HVC - Commerce - The Montana Department of Commerce has developed procedures for the Financial Assessment Subsystem (FASS) reports to ensure they are complete and accurate and that the reviews of these reports are sufficiently documented. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 8/20/2026

Inaccurate Management System Reports - HVC - Commerce - The Montana Department of Commerce implemented a process in fiscal year 2025 to ensure the completeness and accuracy of monthly Voucher Management System reports. The issues occurred during fiscal year 2024, and no issues were present in fiscal year 2025. The department will continue using these established processes to maintain accuracy and support ongoing compliance. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 8/20/2025

Noncompliant Waiting List Selections - HVC - Commerce - The Montana Department of Commerce identified that errors related to data entry delays for paper applications were caused by a training issue. This issue was addressed with the current Waiting List Coordinator, and training was provided to prevent future occurrences. As part of the updated process, the Waiting List Coordinator confirms data entry dates for paper applications before finalizing selections from the waiting list. In addition, the department created separate waiting lists for the ModRehab program to further reduce the potential for errors. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 8/18/2026

Inadequate Monthly Subrecipient Case File Reviews - CCDF - DPHHS - The Montana Department of Public Health and Human Services will further strengthen compliance by enhancing its internal control framework. The Department will refine supervisory review protocols, formalize documentation requirements, and improve monitoring procedures to ensure full alignment with State Plan objectives. The department will also review its State Plan and submit an amendment if necessary. These improvements will ensure continued compliance with State Plan requirements. The Department anticipates full implementation of these strengthened processes in early 2027. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 3/26/2027

Corrective Action Plan: The Owner has taken corrective action by terminating the current management agent and engaging a new management company with demonstrated experience in HUD assisted housing compliance. The new management agent will assume responsibility for all occupancy and recertification activities and will implement procedures to ensure that annual and interim recertifications are completed accurately and within HUD required timeframes. The Owner will oversee the performance of the new management agent through regular compliance reviews and will take any additional corrective measures necessary to ensure continued adherence to HUD regulations and prevent recurrence of this finding. Anticipated Completion Date: The implementation of training and procedures is expected to be completed by December 31, 2026.

Corrective Action Plan: The Owner has taken corrective action by terminating the current management agent and engaging a new management company with demonstrated experience in HUD assisted housing compliance. The new management agent will assume responsibility for all occupancy and recertification activities and will implement procedures to ensure that annual and interim recertifications are completed accurately and within HUD required timeframes. The Owner will oversee the performance of the new management agent through regular compliance reviews and will take any additional corrective measures necessary to ensure continued adherence to HUD regulations and prevent recurrence of this finding. Anticipated Completion Date: The implementation of training and procedures is expected to be completed by December 31, 2026.

Corrective Action Plan: The Owner has taken corrective action by terminating the current management agent and engaging a new management company with demonstrated experience in HUD assisted housing compliance. The new management agent will assume responsibility for all occupancy and recertification activities and will implement procedures to ensure that annual and interim recertifications are completed accurately and within HUD required timeframes. The Owner will oversee the performance of the new management agent through regular compliance reviews and will take any additional corrective measures necessary to ensure continued adherence to HUD regulations and prevent recurrence of this finding. Anticipated Completion Date: The implementation of training and procedures is expected to be completed by December 31, 2026.

CORRECTIVE ACTION PLAN2025-001 [2023-001]—TRACKING AND VALUATION OF MORTGAGE RECEIVABLES AND AMOUNTS DUE TO GRANTORType of Finding: (A) Material Weakness in Internal Control Over Financial ReportingStatement of ConditionWhile the Housing Trust has begun a complete review of its loan portfolio, the project has not yet been completed. Therefore, we were unable to obtain sufficient audit evidence to support the Housing Trust’s tracking and valuation of its mortgage receivables and amounts that are due to grantor.Per our audit procedures, we noted that management was unable to provide the following:A reasonable methodology for estimating its allowance for loan losses.Funding provided by grantors for the loan programs that should also be classified as amounts that are due to grantor.Not all current year loans were recorded in the general ledger (approximative $512,066) and approx. $481,201 were recorded twice.A net prior year adjustment of $36,460 for mortgages receivable and $35,000 for land leases held was necessary.Reclassification between loans accounts and grant revenue were necessaryContextThe Housing Trust has a portfolio of over six-hundred individual mortgage receivables that include both non-amortizing and amortizing loans, which management has valued at approximately $25,291,075. These loans have been funded by several sources, including federal, state, and local funding. Some of the grantors have established in their agreements that these funds do not belong to the Housing Trust, but actually belong to the grantor. CriteriaThe Housing Trust should ensure it has a board-approved policy for its loan portfolio to ensure that these assets are properly tracked, classified, and maintained with specialized loan management software that can perform the following:Loan Classification and TrackingEach loan is properly identified with its funding source (federal, state, local, etc.) and type of restriction Each loan agreement has the funding source specifiedThe current status of each loan is tracked (current, delinquent, defaulted)Loan funding that has been established as due to the grantor is properly tracked.Compliance and ReportingEnsure the loans comply with the specific guidelines of their respective funding source. Audit trails are available for all transactions and valuations.The receivables and related interest accruals supported by the loan management software should be reconciled to the Housing Trust’s accounting software.Financial TrackingThe valuation of the portfolio should be updated periodically (at least quarterly) for any changes in loan status or market conditions.All new loans should be recorded in the general ledger A loan loss policy was established that includes a loan loss methodology incorporating risk classes based on the borrower’s ability to repay. However, the calculations seem to follow a different methodology established afterwards. The policy should be updated with calculation methodology and with the backup research of historical data. A loan review committee should be responsible for reviewing and approving the classifications of loans and the associated allowance for loan losses which should be supported by high-quality data collection on each borrower’s payment history and any relevant economic indicators. The calculations and methodology should follow the approved policy, or the policy should be improved to include all factors mentioned above.EffectThe auditors were not able to verify the accuracy of the loan records and financial statements related to mortgage loans, the related accrued loan interest, the allowance for loan losses and loan funding that should also be recorded as due to grantor. CauseWhile the Housing Trust has begun a complete review of its loan portfolio, the project has not yet been completed. Therefore, the loan portfolio tracking and valuation have not yet been designed or implemented to support its policies and procedures or provide the loan review committee with a workable system for reviewing, approving and monitoring the organization’s mortgage receivable portfolio. The methodology seems to be changing, and the calculations do not seem to be accurate,RecommendationWe recommend the Housing Trust update policies and procedures for its loan portfolio as identified in the “Context” section of this finding to include methodology, risk assessment, historical loan data research, calculations method with reasoning.View of Responsible OfficialThe Housing Trust acknowledges the finding. Due to turnover in prior years, historical loan records and tracking systems were incomplete or inaccurate. Since then, SFCHT has taken the following steps:A second title company has been contracted to obtain final loan data for the 2026 loan portfolio. A title company will also be engaged annually at year-end to identify and resolve any differences arising during the year.Establish one master loan inventory using Portfol data. This inventory will serve as the master loan control schedule for monthly financial reconciliations. All differences will have a documented resolution, including reconciliation of receivables and related interest between the two systems. Reconciliations will be completed by the 15th business day of the following month.Create a new loan-recording process for every loan closing.Create a Due to Grantor Matrix based on findings from the annual loan review performed by the title company. Supporting documentation, such as grant agreements, correspondence, or other applicable documentation, will be maintained.Review the ASC 326 loan loss methodology to ensure it reflects the actual calculation methodology and is supported by appropriate research. This review will be performed quarterly.Establish a formal loan review committee and process to review loan calculations and the allowance for loan losses. The committee will meet quarterly and review reports from Portfol. Meeting minutes will document updates, decisions, and changes.Corrective Action Plan TimelineFinalize and implement the loan loss methodology: by December 2026Begin monthly Portfol-to-QBO reconciliations: by September 2026Fully hand over all loans to Amerinat by end of 2026; Land Leases will remain “in-house”Continue staff training and Executive-level reviewDesignated Employee Responsible for Corrective Action-Director of Operations-Accounting Specialist2025-002 [2023-002]—FINANCIAL CLOSE AND RESTATEMENTS TO BEGINNING NET ASSETSType of Finding: (A) Material Weakness in Internal Control Over Financial ReportingStatement of ConditionDuring the audit of the financial statements, we noted that material adjustments and restatements were necessary to correct errors in the current and previously reported financial statements. A summary of the areas and the net effect of the changes are as follows: Type Amount, net Accounts Receivable $ (13,490) Grants and Contracts Receivable 830,747 Accrued Interest 5,798 Amortizing Loan Receivable 419,551 Non-Amortizing Loans Receivable (433,722) Land Held in Trust (61,323) Other Assets (145,000) Prepaid Expenses (61,940) Notes Receivable (195,000) Developments Projects (184,559) Real Estate Inventory to Sell (333,079) Fixed Assets (785,081) ROU Accumulated Amortization (7,511) Accounts Payable (807) Due to Grantor 10,000 Grant Advances (97,963) Accrued Expenses (6,249) Other Current Liabilities 52,841 Lease Liabilities 7,845 Notes Payable (9,710) Net Assets 1,154,733 Total $ 146,081 CriteriaAccounting Standards Codification (ASC) 265 “Presentation of Financial Statements—Communicating Internal Control Related Matters Identified in an Audit” requires that deficiencies in internal control over financial reporting be communicated to those charged with governance when the design or operation of a control does not allow management or employees to prevent or detect misstatements on a timely basis.The correction of material misstatements indicates the existence of a material weakness in internal control over the maintenance of the organization’s financial statements.EffectThe material adjustments and restatements resulted in significant changes to the current year balances and beginning balances of the organization’s unrestricted and restricted net assets. These adjustments could potentially undermine the stakeholders' confidence in the financial information presented by the organization and may lead to difficulties in securing future funding or maintaining current donor relationships.CauseThe material misstatements were caused by a weakness in the development and implementation of internal controls and financial reporting processes, as well as significant turnover in the organization’s management.RecommendationWe recommend the Housing Trust strengthens its internal controls and financial reporting processes to prevent future occurrences of such errors. This could involve adding additional staff, training current accounting staff and implementing more robust review procedures to ensure that all financial reporting is in strict accordance with GAAP. View of Responsible OfficialThe Housing Trust acknowledges the finding. In prior years, however, internal controls were insufficient. There was no formal month-end close or review process, and prior audits relied on outdated balances without verification. Under new leadershipA formal monthly close calendar has been established, with the monthly close to be completed within 10-15 business days.Create a supporting schedule for every balance sheet account. These schedules will be used as part of the monthly reconciliation process and will be certified.A grant receivable roll-forward will be prepared for each grant, compared to QuickBooks, and reconciled monthly.Each development project will have its own subledger, which will be reconciled monthly.A detailed fixed asset register will be maintained and reconciled quarterly.6. To help prevent future restatements, establish a formal journal-entry control process that requires appropriate supporting documentation and approvals.7. Establish a policy requiring documentation and approval for any changes made to beginning balances.8. The CEO and Finance Committee will perform monthly analytical reviews using the balance sheet, profit and loss statement, and actual-to-budget comparisons.9. Establish a reconciliation exception and audit adjustment log to track outstanding issues requiring resolution, including a timeline for resolving each item.Corrective Action Plan Timeline The timeline to complete this is prior to December 31, 2026.Designated Employee Responsible for Corrective Action-Director of Operations-Accounting Specialist2025-003 [2024-003] - GRANT TRACKING AND SEFA RECONCILIATIONFederal Agency: U.S. Department of Housing and Urban Development (HUD)Federal Program: Housing Opportunities for Persons With AIDS (HOPWA)Assistance Listing Number: 14.241Award Number and Period: [NMH240051], [November 1, 2024 – October 31, 2027]Type of Compliance Requirements: Internal Controls Type of Finding: (B) Significant Deficiency in Internal Control Over Financial ReportingKnown Questions Cost: NoneStatement of ConditionDuring our audit, we identified initial differences between expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) and the general ledger. Management subsequently provided additional supporting schedules and completed a reconciliation of the SEFA to the general ledger. However, the reconciliation required manual effort because one federal award included program income amounts that had not been properly reconciled or corrected, another federal award had expenses that did not belong to the award, and recycled funds were tracked separately partially only from new grant funds in the accounting records. Some of expenses did not have appropriate backup documentation, however, the billing to the grant was correct. Expenses from program income for salaries did not match the timesheets. CriteriaPer 2 CFR 200.302 and 200.510(b), recipients of federal awards must maintain accurate, current, and complete records that adequately identify the source and application of funds. Grant expenditures must be traceable to the financial records and properly classified. Program income, including recycled funds, must be used and tracked in accordance with federal requirements and grantee policies. Specifically, all grants should be tracked separately in the general ledger, and the revenue and expenses should match the reimbursement grants. The SEFA reconciliation should be done thoroughly and discrepancies reconciled or resolved, if that is the case. The policies for recycling the funds should be updated with the financial tracking in the general ledger and update with all grantor recommendations. The HOPWA program policy was updated in July 2025.The recycled funds received/spent should be separately tracked and used per policies and grantor recommendations.EffectThe lack of properly tracking expenditures and recycled funds increases the risk of misstating the SEFA, billing non-allowable or duplicate costs to the grantor, and not meeting timeliness or use restrictions related to program income. This may lead to questioned costs or future audit findings.Recycled funds not properly tracked separately may result in noncompliance with the application of loan funding. CauseThe issues stemmed from frequent staff turnover and the complexity of accounting for loans and recycled funds across departments. RecommendationWe recommend the Housing Trust:Revise and implement grant management policy and procedures that ensure each grant has a dedicated general ledger account.Require all reimbursement requests to be supported by general ledger detail.Ensure program income and recycled funds are separately tracked in accordance with federal guidelines (separate classes).Establish regular reconciliations between Finance and Program records to maintain consistency.View of Responsible OfficialThe Housing Trust acknowledges the finding. Corrective Action Plan: 1. A master grant register has been created that includes all active grants and federal awards.2. Each grant will have a unique class/project established in QuickBooks to capture payroll and other grant-related expenses. Reports will be generated monthly.3. Each grant will be reconciled monthly.4. Grant reimbursement requests will be supported by appropriate documentation.5. Payroll review procedures have been established to confirm that payroll costs are properly allocated to grants.6. Program income will be tracked separately for all applicable income and expenditures.7. Monthly SEFA reconciliations will be completed for all grants, including grants that do not meet the definition for inclusion in the SEFA.8. A grant reconciliation exception log will be established to track outstanding issues, responsible parties, and timelines for resolution. Corrective Action Plan Timeline- Finalize and adopt new Grant Management Policies: by September 2026- Implement monthly SEFA reconciliations: by September 2026- Complete staff training on program income and federal grant tracking: by September 2026Designated Employee Responsible for Corrective Action-Director of Operations-Accounting SpecialistCurrent Year Findings 2025-004 - Program Income Federal Agency: U.S. Department of Housing and Urban Development (HUD)Federal Program: Housing Opportunities for Persons With AIDS (HOPWA)Assistance Listing Number: 14.241Federal Award: [NMH240051], [November 1, 2024 – October 31, 2027]Compliance Requirement: Program Income Known Questions Cost: None Type of Finding: (F, G) Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Noncompliance related to Federal Awards Statement of Condition During 2025, the Housing Trust received certain repayments of loans originally funded by HOPWA awards. Of this amount, certain amount may have remained unspent or had not been recorded/reconciled in accordance with HUD requirements as of December 31, 2025. Management did not maintain a documented control to identify HOPWA repayment receipts, determine the applicable award requirements, reconcile receipts and expenditures among IDIS, QuickBooks, and the program-income subsidiary record, and document approval of their disposition. Criteria Under 2 CFR 200.307(c), program income earned after a Federal award’s period of performance is subject to Federal requirements only when required by Federal agency regulations or the terms and conditions of the award, and the Federal agency may establish appropriate disposition requirements through closeout. HUD may require HOPWA-funded loan repayments received after the original award period to be recorded as program income.CauseThe Housing Trust had not designed and assigned ownership of a formal program-income and grant-closeout control addressing repayments generated from HOPWA-funded loans after the originating award’s period of performance. Effect Program income may have been subject to incorrect or untimely reporting/use, increasing the risk of noncompliance and misstatement of federal expenditures. Known questioned costs were unknown. RecommendationHousing Trust should implement a documented monthly program-income reconciliation and grant-closeout control that identifies the originating award, applicable HUD disposition requirement, IDIS receipt, QBO classification, eligible use, remaining balance, reviewer approval, and resolution of differences. Evidence of HUD determinations for post-period receipts should be retained with the reconciliation.Views of Responsible Officials: SFCHT acknowledges the finding and notes that the New Mexico HOPWA program is the only documented HUD grant that funds mortgages.Management has established a formal process to identify and track repayments associated with HOPWA-funded loans. Management will maintain a subsidiary program income register that identifies the originating federal award, receipts, applicable HUD disposition requirements, accounting classification, eligible expenditures, and remaining balance. Program income activity will be reconciled monthly among loan-servicing records, QBO, IDIS, and supporting program records. Written HUD determinations regarding post-period repayments will be retained when applicable.Corrective Action Plan TimelineAn onsite meeting with HUD HOPWA representatives is scheduled for September 10, 2026, at the Santa Fe offices. During this meeting, policies and procedures, including the program income policy, will be reviewed and formalized, and a HUD determination log will be established.The HOPWA Program Income Register will be implemented, and repayment schedules for HOPWA loans will be documented in the master loan inventory. Implementation date: July 2026.HOPWA program income will be expended before additional HOPWA IDIS reimbursement requests are approved.A historical review of HOPWA loans and funding sources will be completed. Target date: August 2026.QBO, Portfol, Amerinat, and IDIS will be reconciled monthly. Beginning: July 2026 and ongoing.Post-period repayments and related HUD determinations will be reviewed. Target date: September 2026.Designated Employee Responsible for Corrective Action Director of Operations, with assistance from the Accounting Specialist and HOPWA HUD program staff, as applicable.Signature Title

Finding 2025-001: Reporting – Community Development Block Grant/State’s Program and Non- Entitlement Grants in Hawaii Name of Contact Person: Ashley Carson, Chief Counsel Management’s Views and Corrective Action Plan: The Legal & Compliance Department is responsible for the submission of the Annual Performance Report for the Recovery Housing Program and agree with the finding. For 2025, MaineHousing was experiencing an error in HUD’s Disaster Recovery Grant Reporting (DRGR) system with submission of the report and reached out to HUD for assistance. HUD was non-responsive to the first two requests for assistance, and a third request was not made until after the report filing deadline. HUD responded to the third request and assisted by providing technical assistance which allowed the report to be submitted. The report was not filed in a timely manner due to the DRGR system errors and the elapsed time between follow-ups with HUD. As system errors for DRGR are a common issue, the following corrective action will ensure that MaineHousing is proactive in the submission of Annual Performance Report for Recovery Housing. The Annual Performance Report for the Recovery Housing Program is due on October 30th. No later than September 15th each year, MaineHousing will attempt to verify any issues with the DRGR system ahead of the reporting deadline and immediately reach out to HUD for technical assistance with any issues found. MaineHousing will gather the information for the Recovery Housing Annual Performance Report at least 45 days ahead of the October 30th deadline (if available) and attempt submission of that report no later than October 5th. If errors occur in DRGR in submitting the report, MaineHousing will immediately contact HUD and continue to follow up weekly until the issue is resolved, attempting other modes of contact if HUD is unresponsive. If the report cannot be submitted in a timely manner, MaineHousing will request that HUD confirm in writing that late submission is acceptable given the circumstances. Proposed Completion Date: Completed

Finding 2025-004: Eligibility – Housing Choice Vouchers Name of Contact Person(s): Allison Gallagher, Director of Housing Choice Vouchers Management’s Views and Corrective Action Plan: The Housing Choice Voucher (HCV) Department at MaineHousing agrees with the finding. The error occurred during the Annual Recertification process on September 1, 2025. While an interim recertification on January 1, 2025 correctly noted the removal of a household member and indicated that the voucher would be downsized, this information was not correctly carried forward and processed during the annual recertification. During the annual recertification, the household’s voucher size was correctly downsized, but the payment standard of $1,801 was mistakenly retained instead of applying the correct one-bedroom standard of $1,383. While the difference in payment standards is $418, the actual HUD subsidy calculation resulted in a Housing Assistance Payment (HAP) overpayment of $335 per month for four months or $1,340 in total. Upon identification of the error, HCV provided the tenant with the required 30-day notice and processed the necessary corrections to the voucher calculation. To prevent recurrence and ensure compliance with HUD regulations, the HCV Department has strengthened its annual recertification quality control procedures. The department has transitioned from a 75% monthly sample review to a mandatory 100% Quality Assurance (QA) review of all monthly processed Annual Recertifications. Proposed Completion Date: Completed

Management will enhance its review of grant reimbursement requests by comparing billed amounts to supporting expense detail before submission and resolving any differences timely. Additional billing review training has been implemented, and management will continue working with the funding agency to resolve the overpayment.

Finding 2025-010: Noncompliance and Significant Deficiency – Allowable Activities and Allowable Costs Agreement or Disagreement: The Agency agrees with the finding. Planned Corrective Action: The Agency will establish written cost-allocation procedures to ensure that expenditures are charged only to the program receiving the benefit and that all allocations are reasonable, equitable, consistently applied, and adequately supported. The Agency will take the following actions: Cost-Allocation Procedures • Review all methodologies used to allocate shared costs among the Public Housing, Housing Choice Voucher, and other Agency programs. • Establish written procedures identifying allowable costs, allocation methods, required supporting documentation, and approval responsibilities. • Ensure costs directly benefiting one program are charged entirely to that program. • Allocate shared costs using a reasonable and documereplacented basis that reflects the benefit received by each program. • Review and update allocation methodologies whenever programs, staffing, services, or operating conditions change. Property Insurance and Prior Allocations • Review property insurance expenses to ensure costs associated with Public Housing properties are not charged to the Housing Choice Voucher Program. • Verify and correct the $14,202.98 property insurance allocation identified during fiscal year 2025. • Review the approximately $24,964.76 in similar allocation errors identified during the two preceding fiscal years. • Record all necessary correcting entries in accordance with applicable accounting requirements and guidance from the Agency’s auditor. • Retain documentation supporting the review, calculations, correcting entries, and final disposition of the prior-period amounts. Documentation and Supervisory Review • Require invoices, allocation calculations, and supporting documentation to be reviewed before expenditures are charged to a federal program. • Implement a supervisory approval process for shared costs and expenditures affecting multiple programs. • Document the allocation basis, calculation, programs charged, reviewer, and date of approval. • Periodically review significant expense accounts to identify allocation errors and ensure corrections are made promptly. • Reconcile financial reports and general-ledger activity to supporting invoices and allocation documentation. Training and Ongoing Monitoring • Provide training to accounting and administrative personnel regarding federal cost principles, allowable costs, and allocability requirements. • Ensure staff understand that federal program funds may only be used for costs that benefit that program. • Conduct periodic internal reviews of expenditures charged to the Housing Choice Voucher Program. • Report the results of monitoring activities and any unresolved allocation issues to the Executive Director and Board of Commissioners. • Provide additional training or corrective guidance when errors or inconsistencies are identified. Management will periodically evaluate compliance with the cost-allocation procedures and report the results and any unresolved deficiencies to the Board of Commissioners. Estimated Completion Date: Written cost-allocation procedures and supervisory review requirements will be implemented by October 31, 2026. The review and correction of the fiscal year 2025 property insurance allocation and prior-year allocation errors will be completed by December 31, 2026, with quarterly monitoring thereafter. Responsible Parties: Executive Director, financial and accounting personnel, applicable program staff, contracted accounting professionals, and Board of Commissioners.

Finding 2025-009: Noncompliance – Special Tests and Provisions Agreement or Disagreement: The Agency agrees with the finding. Planned Corrective Action: The Agency will establish written procedures and a compliance calendar addressing waiting-list administration, annual utility allowance reviews, and required inspection quality-control reviews. The Agency will take the following actions: Waiting-List Administration • Review existing waiting-list records and procedures. • Maintain documentation supporting applications, preferences, applicant selections, withdrawals, removals, updates, and offers of assistance. • Ensure applicants are selected in accordance with the Administrative Plan and documented waiting-list order. • Restrict and monitor access to waiting-list records. • Periodically reconcile system-generated waiting-list reports to supporting documentation. • Conduct and document periodic waiting-list purges in accordance with the Administrative Plan. Utility Allowances • Complete and document an annual review of the Voucher program’s utility allowance schedules. • Retain utility rates, consumption information, calculations, conclusions, and supporting documentation. • Present revisions to the Board for approval when an adjustment is warranted. • Document the review even when no change to the utility allowance schedule is required. Inspection Quality Control • Establish procedures for selecting and completing the required number of quality-control inspections. • Ensure the quality-control sample is selected in accordance with applicable HUD requirements. • Use a qualified individual other than the original inspector to perform the quality-control review. • Document the units reviewed, deficiencies identified, comparison to the original inspection, and corrective action taken. • Apply the HUD inspection standard in effect for the Voucher program at the time of the inspection. • Use quality-control results to identify training needs and improve inspection consistency. Management will review compliance with these requirements periodically and report the results and any unresolved deficiencies to the Board of Commissioners. Estimated Completion Date: Written procedures and the compliance calendar will be implemented by October 31, 2026. The outstanding utility allowance review and initial inspection quality-control review will be completed by December 31, 2026, with annual and periodic monitoring thereafter. Responsible Parties: Executive Director, Housing Choice Voucher program staff, designated inspection personnel, and Board of Commissioners.

Finding 2025-008: Material Weakness in Internal Control Over Compliance – Housing Choice Voucher Program Agreement or Disagreement: The Agency agrees with the finding. Planned Corrective Action: The Agency will develop and implement a comprehensive system of written internal controls and compliance procedures for the Housing Choice Voucher Program. The Agency will also: • Develop standardized tenant-file checklists covering eligibility, income, assets, deductions, citizenship or eligible immigration status, Social Security numbers, EIV documentation, rent reasonableness, inspections, leases, HAP contracts, annual and interim reexaminations, portability, and other applicable requirements. • Require the checklist to be completed and maintained in each participant file. • Establish and document supervisory or quality-control reviews of an appropriate sample of applicant and participant files. • Correct deficiencies identified during supervisory reviews and document the corrective action taken. • Update the Administrative Plan to incorporate applicable HOTMA provisions and current HUD guidance. • Establish procedures for reviewing HUD notices, regulations, handbooks, and other program guidance. • Provide regular training to employees responsible for administering the Voucher program. • Clearly assign program responsibilities and develop written procedures to reduce dependence on the knowledge of individual employees. • Maintain a compliance calendar for recurring program responsibilities and reporting deadlines. • Provide the Board with periodic reports regarding compliance reviews, deficiencies identified, and corrective actions completed. Estimated Completion Date: Checklists and supervisory-review procedures will be implemented by October 31, 2026. Written procedures, policy updates, and initial staff training will be completed by December 31, 2026, with ongoing monitoring thereafter. Responsible Parties: Executive Director, Housing Choice Voucher program staff, designated supervisory staff, and Board of Commissioners.